이 기사는 2022년 05월 09일 07:56 thebell 에 표출된 기사입니다.

Investment bankers are struggling to justify a higher valuation for LG CNS than its listed peer Samsung SDS in its planned initial public offering despite its strong earnings growth, as the South Korean information technology services company lacks strengths that differentiate it from its competitors.

Investment banks invited by LG CNS to pitch for roles in its IPO put a valuation of between 6 trillion won and 7 trillion won ($5.5 billion) on the company based on what its stock is traded at in the over-the-counter market.

This valuation is higher than Samsung SDS, LG CNS’ closest peer listed on Kospi. Based on Tuesday’s closing price and 633.4 billion won in net profit in 2021, Samsung SDS’ price-to-earnings (P/E) ratio is around 17.7 times. This P/E ratio represents a valuation of only 4 trillion won for LG CNS based on its 2021 net profit.

LG CNS might be able to justify a higher valuation if it has strengths that can differentiate the company from its rivals. One of those strengths was its lower reliance on intercompany transactions.

Intercompany transactions accounted for 59% of LG CNS’ total consolidated revenue in 2019. But the proportion rose to 64% in 2021, closer to 68% for Samsung SDS. The figure could have further increased if revenue from LX Group, which spun off from LG Group in May last year, was included.


LG CNS is also making little progress with its new businesses. In 2019, the company created a data and analytics team as part of efforts to ramp up its cloud computing business. Kim Eun-saeng, former vice president of Dell Technologies, was named to lead the team. But without notable results, Kim stepped down from the role earlier this year.

“It will be difficult for LG CNS to justify the 7 trillion won valuation,” an investment banking source said. “There are not many things that can be done until the IPO except hoping market conditions improve.” (Reporting by Yoon-shin Choi)